Who cares about valuations when the company can change the world, right?
Brian Burns - SEEKINGALPHA
- August 10, 2010
Are you ready to plug in your car? Electric car manufacturer, Tesla Motors (Nasdaq: TSLA), is betting on it; and judging by the success of their recent IPO in June, so are investors. The company currently boasts a market capitalization of $1.8 billion which could be questionable considering 2009 sales of $111 million and little to no improvement expected in 2010. Their recent quarterly earnings release did show an increase in top line growth but it also showed an even steeper increase in their net loss.
But who cares about profits when the company can change the world, right? The company has recently been compared to Microsoft (Nasdaq: MSFT) and I can only assume the large market cap is due to investors who don't want to miss, "the next big thing". Looking for the next Microsoft is like searching for the Holy Grail, except most investors aren't Indiana Jones.
Tesla fans love to point out how fancy their showroom is, how great the electric car idea is, and when asked about Tesla's losses will most likely say, "what would you expect?" They also love to point out that, just as with a start-up bio-tech company, you can't place a value on its stock by looking at current earnings or losses. They have a point - to some extent. But unlike most start-up bio-tech companies, Tesla has a product being sold, the Roadster. And since the company isn't profitable with the Roadster investors are pinning their hopes on Tesla's next model, the Model S, due out in 2012. The company used its start-up money to build the car it wanted to but now I'm supposed to wait another two years for "the good one"? The Model S is supposed to be more affordable than the Roadster, available to be mass produced, and is the car that investors think will make this company a success and their investment worth the risk... [Read More]